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Do You Need a CPA to Sell Your Business? Understanding the Role

Whether your small business is a sole proprietorship, a partnership, or an LLC, you may want to work with a CPA when selling it. This is because selling a business should include an insightful analysis of an entity’s financial statements and a well-informed understanding of the tax implications.

While you may be tempted to handle this transaction yourself to save money, you may save more cash if you involve a professional CPA.

How a CPA Can Help When You’re Selling a Business

There are certain skill sets certified public accountants have by virtue of their training that can be helpful when you’re cashing out your investment. Let’s take a look at some of these below.

Expertise in Business Transactions

CPAs are trained in preparing financial statements, handling complex financial transactions, and reviewing financial records.

A CPA with years of handling business transactions will know the nooks and crannies they need to look after and maneuver carefully. Because of this, you may not want to pick a CPA who has just been preparing tax returns.

Knowledge of Financial Analysis

While a bookkeeper prepares financial statements and keys in the data, a CPA has the skill to make sense of the data. This financial analysis skill, the ability to correctly read financial statements and make sense of financial data, can come in handy for small business owners in a business sale.

How exactly can a CPA help you when you’re selling your business?

Determine the Fair Value of Your Business

When selling your business, a CPA can help you determine its worth.

While you can easily see the book value of your business by looking at your financial statements, fair value requires valuation expertise and is a different kettle of fish.

Owning a brick-and-mortar business in a highly desirable area may mean your business is worth more than the books show. And a CPA can help with that type of business valuation.

Maximize the Value of Your Business

Every seller wants to get the best sale price for their business. And the only way to achieve this is by maximizing their entity’s value. Unfortunately, sellers may not know how to go about this. And this is where a CPA can come in handy.

A CPA might suggest things like:

• Implementing new accounting software to provide better financial data
• Paying down debt
• Changing business structure
• Decreasing reliance on the owner’s operational or financial assistance
• Improving cash flow

Provide Tax Planning Strategies

When selling your business, you may think you have negotiated a good deal until it’s time to pay the IRS.

However, involving a CPA with expertise in business transactions can make significant tax savings you wouldn’t have known about.

A CPA can help you with things like:

• Structuring the sale for more capital gains income than ordinary income
• Determining if an installment sale or seller financing is right for you
• Deferring taxes

Complete Due Diligence

Without completing your due diligence before a potential buyer comes along, you may end up playing catch-up.

Engaging a CPA before you hang the For Sale sign outside is a wise investment. They can help with:

• Reviewing financial statements for accuracy
• Verifying your tax compliance
• Verifying the existence of physical and intangible assets

Centralize Financial Documentation

A buyer will want to review all your financial information before paying you a penny. And while most of that financial data will be found in your financial statements, there are other documents you’ll want to have on hand, including:

• Last three years of tax returns
• Payroll taxes and records, if applicable
• Lease agreements
• Debt agreements

Advocate for You Throughout the Process

One of the most useful services a CPA can provide when selling your business is being your financial advisor.

You can ask for their financial advice on any monetary concessions the buyer wants while ensuring you get the highest sale price. And they can help you with the after-sale financial and tax matters—like what to do with the proceeds and how to minimize your future tax liabilities.

To learn more about how taxes impact the sale of a business, visit the Taxes on the Sale of a Business section in the BizBuySell Learning Center.

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